Aster DM Healthcare to re-file for IPO, but at lower valuation

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Aster DM Healthcare Ltd, which runs hospitals in India and West Asia, is set to re-file its draft share sale documents sometime this week or the next, after concerns over valuation of its overseas business delayed its IPO plans, said two people aware of the development.

Aster DM had filed its draft red herring prospectus (DRHP) for an initial public offering (IPO) in June last year and received approval from the Securities and Exchange Board of India (Sebi) in November.

“It can happen within this week or early next month,” said one of the two people cited above, requesting anonymity as the talks are private.

Mint had reported in April, that Aster was mulling re-filing its DRHP, a move prompted by the market conditions in its overseas business, especially in Saudi Arabia, which has been impacted by the fall of oil prices.

In its earlier DRHP, Aster DM disclosed that in Saudi Arabia, where a substantial portion of its revenue is derived from patients referred and funded by the ministry of health, a decline in oil prices and the overall economic conditions have had a direct impact, resulting in an increase in receivables from the ministry of health.

In order to counter this, the company said it was exploring other business opportunities in Saudi Arabia, including increasing its share of private insurance and walk-in patients.

“However, there can be no assurance that we will be able to successfully secure alternative sources of revenue in Saudi Arabia, or at all,” the company said in the draft prospectus.

The company was earlier looking to raise around $300 million (through a mix of primary and secondary share sale) from the IPO, which would have valued the company at around $2.5 billion.

The re-filed DRHP will, however, see the company aim for a reduced fundraising and at a lower valuation, which could be at least 20% lower than the earlier targeted valuation, said the second person cited above, also requesting anonymity.

An email sent to Aster DM Healthcare on Wednesday did not elicit any response.

Aster DM’s portfolio of healthcare facilities, includes six hospitals, 83 clinics and 180 retail pharmacies in the Gulf Cooperation Council (GCC) states; seven multi-speciality hospitals and three clinics in India; and one clinic in the Philippines as of 31 March 2016. Aster’s hospitals in India are located in Kochi, Kolhapur, Kozhikode, Kottakkal, Bengaluru and Hyderabad and are operated under the Aster, MIMS or Prime brands. Its clinics in India are located in Kozhikode and Bengaluru.

Aster DM’s operations in India, which primarily consist of hospitals, accounted for only 12.52% of the company’s total revenues in the nine months ended 31 December 2015, according to the draft prospectus.

For the nine months ended 31 December 2015, GCC countries contributed Rs3,264.4 crore to revenue, compared with a contribution of Rs467 crore by the Indian operations.

The company has received investments from private equity (PE) funds Olympus Capital Asia Investments Ltd and True North (Managers), previously known as India Value Fund Advisors. Both PE funds were expected to dilute a part of their stake along with the promoters in the IPO.